Tran Duc Luong
France occupied all of Vietnam by 1884. Independence was declared after World War II, but the French continued to rule until 1954 when they were defeated by communist forces under Ho Chi MINH, who took control of the north. US economic and military aid to South Vietnam grew through the 1960s in an attempt to bolster the government, but US armed forces were withdrawn following a cease-fire agreement in 1973. Two years later North Vietnamese forces overran the south. Economic reconstruction of the reunited country has proven difficult as aging Communist Party leaders have only grudgingly initiated reforms necessary for a free market.
One of the most important political events to happen in Vietnam in 2002 was the election held in May of the country's new National Assembly (NA), the highest legislative body, for the 2002-2007 term. 498 individuals were elected as parliament members, including 118 permanent members, who will work on NA committees during their term, unlike the majority of members, who usually operate in local areas and only attend regular meetings of the NA when they are arranged.
The NA has decided on the new government cabinet, whose working term will also extend from 2002 to 2007. Prime Minister Phan Van Khai was re-elected and the number of deputy prime ministers cut to three for the next five years from four in the previous term.
Minister of Trade Vu Khoan, was elected deputy PM in charge of trade and foreign affairs, replacing Nguyen Manh Cam. Khoan is respected for his contribution in signing a landmark trade deal between Vietnam and its former enemy the United States.
Two deputy PMs, including Nguyen Manh Cam and Nguyen Cong Tan who was responsible for agriculture, retired. Deputy PMs Nguyen Tan Dzung and Pham Gia Khiem continue in their posts for the next five-year term.
The NA approved the setting up of 26 ministries and ministerial committees, up from 23 in the previous term. The new formation aims to help ministries to focus more on their responsibilities and to work more effectively. Stagnation, overlapping functions and the bulky structure of the government's administrative bodies was one of the major causes of the ineffectiveness of government in its previous terms.
Fourteen new ministers and committee heads or 50% of the government's cabinet have been appointed for this new term, including ministers of police, justice, trade, transport, construction, industry, planning and investment, home affairs, science and technology, natural resources and environment, post and telecommunication, state inspectorate, ethnic minority people, and population, family and children. Two newly-created ministries included the Ministry for Natural Resources and Environment and Ministry of Post and Telecommunication.
The NA held its second meeting, which lasted from November 12th to the middle of December, to seek measures to improve the country's socio-economic situation in the remaining months of 2002 and discuss plans for the next year.
Major issues focused on during this meeting were corruption, squandering, education, criminals, justice and traffic jam and accidents. The government firmly pledged to implement changes to provide a more favourable and equal environment to support private enterprises during the term of the 11th National Assembly, in addition to imposing tougher conditions for state owned enterprises
(SOEs). In practice, the new-found commitment to the private sector remains to be tested. The government has, however, moved ahead with economic reforms related to its pursuit of World Trade Organization
(WTO) membership, and its commitments under the bilateral trade agreement with the US.
In an effort to ease the public's increasing discontent with corruption and other social ills, the Communist Party general secretary, Nong Duc
Manh, promised to pursue a tough campaign to crack down on corruption and wrong-doings of party members. Manh has also attempted to breathe new life into the economic renovation
(doi moi) process, but the pace and progress of economic reform is unlikely to quicken significantly in 2002-03.
The Communist Party, easily the most powerful organization in Vietnam with around two million members, has set targets to consolidate control and leadership in grassroots groups. The Party says it will clarify the responsibilities of commune authorities and other social organizations, make them work under local Party organizations' management, and to consult citizens regarding their decisions. It will also improve discipline in those offices, train staff for commune offices and organizations and increase payments and preferential treatment for grassroots officials, according to the meeting's final announcement.
For many years, Party organizations have had little effect on people since the tasks and responsibilities of Party organizations and local governments have not been clearly defined.
In urban areas, local Party organizations just assemble some retired Party members for impractical gossip sessions and rarely admit new Party members, because most Party members are drawn from their offices' organizations.
In rural areas, Party members are also commune authorities, so they have unchallenged power to decide on local issues, which is the root of increasing corruption and abuse of power, illustrated by the mounting number of complaints and criticisms.
The Party only has groups in State-owned enterprises and administrative offices. While private and foreign invested enterprises keep expanding and increasing their contribution to the economy, the Party has not yet set up organizations in those sectors because it still prevents Party members from operating businesses. The NA's final announcement, however, did not make it clear if the Party would admit business people into its organization in a bid to increase its influence in the private sector.
However, not wanting to evade the increasingly important role of private businesses, the party this year made an historical decision allowing businessmen to be members and will permit current members to operate private enterprises. Party members can run private enterprises if they do not violate laws and have the support of their staff and
neighbours. They can maintain their Party membership if they wish. The Politburo, the country's political elite, hopes that Party members working in the production sectors will be excellent businessmen who can make legal fortunes and encourage other people to make fortunes but do not explain how these objectives may be
In the Party's previous regulations, Party members could not practice labour exploitation, because it is contradictory to old Russian socialist theory, which the Party adopted as a bible. But the Party never clarified what
"labour exploitation" was, resulting in an implicit understanding that Party members could not run private businesses that employ workers.
In fact, no Party members are directors of private companies and few are working in private companies. The permission to do so came along with the Party's resolutions on boosting the private sector's role in the economy and on improving the Party's leadership in grassroots organizations.
The Party now has to admit the existence and increasing role of the private sector. Despite much discrimination and repression, the private sector now contributes around 60% of GDP. The Party also realizes that it has lost control, along with its image and prestige at the grassroots level, in rejecting the private sector, the largest and fastest emerging part of society.
One of the pressing issues that the party has had difficulty in coping with in 2002 is its failure to find answers to the people's complaints and criticisms. The number of petitions from people regarding losses caused by, and their discontent over, the increasing number of cases of wrong doing, corruption, trade fraud and undue extravagance are on the rise. Many also expressed fury at not receiving any answers to their petitions from local authorities. The State Inspection Department received over 35,000 petitions last year, which were described as becoming more complex.
Update No: 021 -
A surge in the number of foreign businesses increasing investment in Vietnam reflects the nation's improving investment environment.
More than 230 foreign companies registered to increase investment by a combined $539 million in the first seven months of this year, according to the Ministry of Planning and Investment.
The expansion plans support a recent survey by Vietnam Business Forum which found a majority of businesses believed that the outlook in Vietnam will improve in the future. Many companies surveyed also said they planned to expand operations due to growing market and political stability.
64 percent of Japanese companies in Vietnam have said that they plan to expand their business in the next one or two years.
Among the companies increasing their investment is Cai Lan Oil, upping its capital by $18 million, fabric producer Tainan, increasing its stake by more than $20 million and the Taiwanese backed Royal International Joint Venture in HaLong Bay that has announced plans to increase its investment by more than $10 million. Royal International last year raised its investment from $39 million to $46 million.
Life insurance firm Prudential Vietnam late last year raised its investment capital from $40 million to $62 million. It was the second time the company increased its registered capital after an increase in 2001 from $15 million to $40 million.
Japan's Nidec Tosok in Ho Chi Minh city's Tan Thuan Export Processing Zone raised its investment from $1 million 10 years ago to more than $80 million.
Two-thirds of the trade organisation survey's respondents expected more profits in Vietnam this year due to expansion of exports and local sales.
This response was second in Asia only to India's 81 percent and well ahead of the neighbouring country, China with 54.2 percent.
Most Japanese companies were pleased with the recent decreases in domestic telephone tariffs, which are now among Asia's lowest, and corporate income tax rates which are also lower than in most other countries.
Social and political updates
Vietnam is rated as one of the world's most graft-ridden countries according to Transparency International's Corruption Perception Index. Vietnam came equal 85th (along with Georgia and Ukraine) out of 102 countries for corruption.
The general director of the state-owned Vietnam Oil and Gas Corporation (PetroVietnam), the country's largest corporation, has been dismissed, along with his deputy and the president of the company's management Board has been reprimanded. They committed "serious errors," which is one way of putting it. They may have accepted bribes totaling as much as $20 million in the bidding process for the main construction contract of the $1.3 billion oil refinery that is (so slowly) being built in the central coastal town of Dung
The director of the Health Department of southern province of Long An has resigned, along with his deputies for reportedly financial mismanagement. A total of 12 local government officials from Dak Lak commune have been arrested for embezzlement as they appropriated individual properties and imposed illegal taxes on people which they then pocketed.
After a year-long investigation, the State Inspectorate reported that almost 14 percent of the capital that was provided in 17 state-funded major infrastructure projects was "incorrectly used". Most of the projects were undertaken by ministries and provinces. It is an endemic problem with governments that are not accountable to their citizen in free and fair elections. In communist countries, officials are usually poorly aid and yet have decision-making power over massive amounts of money. The contrast is dramatic and although sacrificial victims are winkled out from time to time, the culture is one of self-enrichment by power holders.
Incapable high-ranking ministers
National Assembly (NA) deputies are becoming increasingly vocal about what they see as the vague and evasive responses given during ministerial question and answer sessions. This reflects the low professional qualities of high-ranking officials who are granted control over important economic sectors. But also, it illustrates a new mood by the N~A of declining to merely be a rubber-stamp forum for decisions taken else.The minister of Education Nguyen Minh Hien was criticised for giving an answer that was "tortuous and vague" and that emphasized successes rather than addressing problems. Some senior members of the NA want to hold ministers more accountable, even disciplining them when their answers are not satisfactory. In a relatively rare display of assertiveness, deputies including NA chairman Nguyen Van An, expressed strong opposition to a proposal by the minister of Finance to impose a special consumption tax on motorcycles worth more than $1,600. Deputies argued that the measure would have little affect on road congestion, but would be burdensome to rural poor. The minister of Finance was argued to make greater efforts to reduce the capital leakage in state-funded infrastructure projects. The weakening of government credibility especially in the way it handles money is likely to increase friction between the government and the NA over the next few years.
The government is not impervious to the criticism of international organizations of the human rights issue. In an unexpected move, the Prime Minister Phan Van Khai met with the 86 year-old head of the banned Unified Buddhist Church of Vietnam (UBCV) Thich Huyen Quang. For 11 years Mr. Quang had essentially been under house arrest in Quang Ngai pagoda in central Vietnam (since 1982), but he was recently allowed to travel to Hanoi for medical treatment. The gesture represented a slight softening of the government's stance towards the UBCV. The government is probably betting that the UBCV not longer represents a significant threat to the regime and is therefore keen to appease international criticism by seemingly becoming more tolerant of religious groups. The government is using a stick as well as a carrot in its handling of the grievances of ethnic minorities. Almost one in six Vietnamese comes from an ethnic minority group, which are found disproportionately in the poorer ands more remote parts of the country. Rattled by riots in the central highlands in February 2001, the government began to pay more attention to problems of ethnic minorities. The government says it is committed to building infrastructure in the ethnic minority areas, reducing poverty (mainly through subsidies), expanding education and appointing more ethnic minority people to positions of authority.
Vietnam Airlines jets into new era
Fuelled by the delivery of new long-haul aircraft and an ambitious route expansion programme, Vietnam Airlines has signalled its intent to become a major player in Asia's competitive aviation market, Ben Rowse reported for VNS.
The national flag carrier's roots date back to 1956, but it was not until the late 1980s when Viet Nam committed itself to economic reforms, that it began to move away from its reputation as a charmless, fear-inducing cattle carrier.
"During the 1960s and 1970s it was a typical airline using old Russian aircraft. It was badly managed and had a classic bureaucratic set-up," said Tom Ballantyne of Orient Aviation, the industry's regional magazine.
Today, however, the carrier, spurred on by an astute management team, has forced its way onto the bottom rungs of the industry's major league, taking advantage of Viet Nam's decade-long period of economic growth.
"This is an airline with a future," said Peter Harbison, managing director of the Centre for Asia Pacific Aviation, a Sydney-based consultancy.
"I think it has done extremely well given where it started off from not so long ago. It has been very patient in terms of growth and is now able to take advantage of growing passenger numbers," added Ballantyne.
Last year the company's revenue reached VND11 trillion (US$718 million) with pre-tax profits of VND570 billion ($37.2 million).
Crucial to its success has been the forging of code-sharing alliances with major international carriers such as Cathay Pacific and Japan Airlines.
"By getting into such relations the operational and management strengths off their partners have filtered through into the company," said Harbison.
"The codeshares have also given it an opportunity to expand their gravitas in the market and prepare the ground for operating these services itself," he added.
His comments were echoed by Ballantyne: "Vietnam Airlines has been happy to grow while learning from whomever they can learn from."
A corporate makeover in April this year involving a new logo and livery, coupled with a plush advertising campaign on CNN and other networks, have also added an element of previously lacking sophistication to the carrier.
But it is not all blue skies for one of the best managed of the nation's State-owned enterprises, many of which are haemorrhaging money.
Last year, Vietnam Airlines carried 4 million passengers, including 1.77 million foreign passengers. Passenger traffic, however, fell 8 per cent year-on-year in the first six months of 2003 due to SARS and the Iraq war.
Furthermore, the carrier still has a lot of work to do on its in-flight service - particularly among its flight attendants, who have built up a reputation for inattentiveness - to convince the flying public that it is deserving of its status as a regional player.
"Like a lot of developing airlines, there is a certain amount of inconsistency in the service, something you tend not to get on Singapore Airlines or Thai Airways," said Ballantyne.
"There is a still a need to work on its in-flight product and service."
However, healthy passenger numbers and positive feedback on the carrier's direct flights to Paris from Ha Noi and HCM City, which began in June, suggest it can break into the long-haul market.
The company said that it hopes to open up a non-stop service from Ha Noi to Frankfurt - its second European destination - by the end of the year and it has also recently announced a host of other new regional routes.
Key to the carrier's route expansion strategy has been its purchase of new aircraft, particularly those capable of working the medium - and long-haul routes.
It has taken delivery of the first of four Boeing 777-200ER jets. The purchase was guaranteed by the US Export-Import, the official US credit agency, in its first ever deal in Viet Nam.
On August 15th, the bank put its guarantee on a second jet, which is due to be delivered next month, and it is expected to do the same for the remaining two over the next couple of years.
Its Boeing purchases were followed by a commitment in October last year to buy five Airbus A-321 aircraft, while in April and July the carrier took delivery of two leased Boeing 777-200ER jets.
"Vietnam Airlines has been growing at around 10-15 per cent per annum for the last decade and these new aircraft will provide it with the capacity to continue its growth," said ING's Wickham.
HCM City becomes home to high-interest bonds
HCM City is to become the first locality in Vietnam to issue municipal bonds worth VND1.2 trillion (US$77.5 million) next month. However, individual buyers stand no chance of buying large quantities of the bonds because financial institutions including banks, insurance companies, securities companies have already oversubscribed bond issuance. These bonds offer the best interest rates available for such a risk-free investment with 8.52 per cent per year for two-year bonds and 9 per cent per year for five-year ones.
News of the bonds led three banks register to purchase VND1,400 billion and some bankers say if the bonds were worth VND10-15 trillion, they would be bought up in no time. In order to give the issuance some publicity, HCM City will reserve VND200-300 billion of bonds for individual buyers, including foreigners living in Viet Nam.
Some market analysts say the high interest rates HCM City is offering will affect market rates, pushing up capital costs that are already high. They say the city can organise bidding among financial players to bring down interest rates and at the same time save some costs of issuance, which are expected to reach VND10 billion.
Industrial corporations thirsty for capital
Many production projects that would be on schedule, have been temporarily stopped because of a lack of capital that many corporations were expecting from Development Assistance Fund.
A Ministry of Industry statistic showed that more than VND13,448 billion (US$867.6 million had been invested in industry from January up to the end of July this year, an increase of 30.15 per cent compared with that of the same period last year. However, the number is only 31.38 per cent of this year's target.
Mai Hoang An, the general director of the Vietnam Textile and Garment Corporation, said his company lacks capital from the DAF to carry out its projects, such as upgrading and modernising the production lines of dying and textiles.
From 2001 to now, the DAF has given VND1.5 trillion to the Viet Nam Textile and Garment Corporation. But that is only 58.8 per cent of the capital that it agreed to grant the corporation, and only 29.5 per cent of what the company's approved projects demand. As a result, some of the company's transition projects still need more capital, including the Yen My Dying Factory, the production line of the Dong Nam Textile Company and the production line of the Nam Dinh Textile and Garment Company.
The paper industry needs VND3.13 trillion to carry out its projects for the year, but it has only received VND175 billion. Some of the bigger projects have not yet received any capital. Since August of last year, the Kon Tum Paper Pulp Factory has stopped all disbursements.
The Ministry of Industry is asking all corporations and enterprises to reassess all of their projects. It will focus on those projects scheduled for completion this year. It will also co-ordinate with the Ministry of Finance to arrange for preferential funds for key projects in the fields of fibre, textiles and dying.
But on a more positive side, while awaiting aide from DAF, many industrial corporations are finding unique ways to mobilise capital to develop their operations.
The Electricity of Viet Nam Corporation, for example, has borrowed capital from domestic banks, the World Bank, the Asian Development Bank, the Japan Bank for International Co-operation, and other countries to carry out its projects.
According to Dao Van Hung, the corporation's director, the company needs an investment capital of VND19.5 trillion this year, 46.7 per cent more than last year. The State's preferential credit fund has just granted VND600 billion to the corporation, 35 per cent of its registered capital.
Thanks to the new funds, work on the 500kV Pleiku-Thuong Tin wire project has begun. It is expected to have access into the national electricity grid by 2005. The company is also building hydro-electricity plants in Quang Tri Province, A Vuong and Buon Kuop
PVC plant in the pipeline
Work is in full swing to meet the October deadline for the country's largest polyvinyl chloride (PVC) plant being built in the southern province of Ba Ria-Vung Tau. The US$70 million plant is owned by the Phu My Plastics and Chemicals Ltd. (PMPC), a joint venture between PetroVietnam, a local service and technical equipment ex-im company, Tramatsuco, and Malaysian behemoth, Petronas. Petronas holds 50 per cent in the company, PetroVietnam, 43 per cent, and Tramatsuco the remainder. The factory is situated 85km southeast of HCM City in the Cai Mep Industrial Park, in the petrochemical development zone of Phu My Industrial Zone, Vietnam News has reported. It will have an annual processing capacity of 100,000 tones of PVC resins - raw material for plastic production - which will increase to 200,000 tones in three years. While the plant imported the first lot of vinyl chloride monomer material from Malaysia for trial operations last June, for the longer term, it will turn to domestic gas sources, according to a Petronas official.
All plastic manufacturers now resort to PVC resin imports - on average 800,000 tonnes a year from countries like Japan, the Netherlands, Republic of Korea and Thailand. Soaring import prices last month - of nearly 20 per cent - caused palpitations for domestic producers, some of whom began trying recycled materials; however, it meant they could not ensure consistency in the quality of their output. Once the new plant begins operations, it will become one of the country's leading manufacturers and distributors of PVC resins. It will also become vital to meeting domestic demand for these resins of 120,000 tonnes per annum, expected to rise to 150,000 tones next year, its high quality helping reduce reliance on costly imports. In future, following further expansion, it is expected to substitute PVC imports entirely. PMPC will provide technical training for its Vietnamese staff in Malaysia. Besides, in co-ordination with PetroVietnam's vocational training college in the province, train local workers in machinery operation and maintenance, occupational safety and English.
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